The growing income gap, state by state

Marketplace Contributor Nov 15, 2012
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The growing income gap, state by state

Marketplace Contributor Nov 15, 2012
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Here’s a juicy stat to ponder on a commute to work. If you fall in the bottom fifth of wage-earners, you’re making, on average, about $1,000 more than you would have made thirty years ago. If you fall in the top fifth of wage-earners, during that same period your income has grown more than $2,000 — every single year. That’s according to  a new report out today co-authored by the Economic Policy Institute and the Center on Budget and Policy Priorities, that also digs in to the income gap, state by state, analyzing U.S. Census data. 

Since the late 1970s, income gaps have widened most in California, Connecticut, Massachusetts, New York and Kentucky, according to the report, but no state has been untouched.

“In every state, the top grew, often much faster than the bottom,” says Doug Hall of the Economic Policy Institute.    

Does that matter? A little inequality is actually a good thing, at least for economic growth, according to economist Mark Partridge, at Ohio State University. He’s studied the effects of income inequality state by state, and concluded that up to a point, “it provides incentives for innovation; it provides incentive for education to go out and get more skills to start a business,” he says.

But, once you have too much inequality, Partridge says the system can become gamed, “Instead of coming up with new innovation, the elite with all the wealth might use the political process to try to maintain their wealth.” His current research suggests that states like Louisiana, Mississippi and parts of south Texas have started to show signs of the detrimental effects of too much income inequality.

By breaking things down state by state, the authors of today’s study hope to give fodder to local lawmakers to take action against those effects. They prescribe things like raising the minimum wage, and a more progressive tax system. Things that have so far gotten federal lawmakers in a whole lot of gridlock. 

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